PokerStars and Zynga Position for Market Share
THE WEEKLY SHUFFLE, 2012-12-09, by OzoneLast week, the poker world was met with two pieces of news involving large operators jostling for position in the U.S. online poker market share. With [[ptlink Nevada online poker @@ /lasvegaspoker/lasvegaspoker.php]] having already been made legal and other states like New Jersey considering similar legislation, companies are feeling the heat from their investors and board members to secure relevancy in these future markets.
PokerStars Rumored to Buy Atlantic City Casino
Less than two years removed from being the target of a U.S. Department of Justice investigation, PokerStars may now be close to acquiring its own casino on American soil. News outlets reported last week that PokerStars is in talks to buy the Atlantic Club casino, a struggling operation in Atlantic City, New Jersey.
There is ample incentive on both sides of this deal. First, Atlantic Club is going insolvent. In the wake of Hurricane Sandy which only worsened the casino's financial situation, they are in the market for a white knight. Enter PokerStars.
PokerStars' incentive for acquiring a New Jersey casino property is rather obvious. With legal online poker in New Jersey viewed as an imminent outcome, PokerStars could enter in on the ground-floor of that market by first acquiring a New Jersey casino. Under the current framework of New Jersey's legal online poker efforts, only operators of Atlantic City-based casinos will be granted access to servicing the state's residents with online poker games.
The state of New Jersey may have no choice but to smile upon PokerStars by granting them an online poker license one day. Atlantic Club's potential for insolvency has politicians motivated to find ways to preserve the jobs sustained by that operation. If PokerStars can supply the capital, it has been suggested the deal would be below $50 million, it could come with a backroom understanding that the company's past transgressions with the U.S. government will be overlooked. This would clear a path for PokerStars to do what they do best: run an online poker room. And knowing this company's propensity for success, they might even be able to turnaround the fledgling Atlantic Club while they're at it.
Zynga Applies for Nevada Gaming License
One of the most badly battered publicly traded companies of 2012 is that of social gaming operator Zynga. After making their initial public offering a year ago at $10 per share, the company now trades at less than $2.50. Zynga is desperate to give investors a reason to get back on board and it appears they believe online gaming is the solution.
In October, Zynga and bwin.party agreed to a deal that would help Zynga move into the UK real-money gambling market. The company has over 30 million sign-ups to its Facebook-based 'Texas Hold'em Poker' game and believes they can parlay this into overnight legitimacy in the real money online poker market. The folks behind Party Poker are eager to help them following the agreement between the two companies.
Zynga is encroaching even further into the real-money online poker world as they have now applied for a preliminary finding of suitability with the Nevada Gaming Control Board. The move is unsurprising and causes one to wonder what took Zynga so long to make their advancement into Nevada's legal online poker market. For Zynga's purposes, the move worked; their stock was up 7% on news of their reaching out to Nevada regulators.
Zynga, however, is toast. Perhaps one reason the company waited so long to apply for a license in Nevada is that they don't really believe it will help their company in a significant way. Even if they are approved as an operator, the Nevada online poker market will be crowded and small. Zynga will find themselves competing for the attention of just thousands, not millions, of online poker players along with major casino giants like MGM Resorts and Caesars Entertainment.
The best result for Zynga, and U.S. online poker players as a whole, would be legislation to legalize the game at the federal level. Zynga's foray into Nevada could be viewed as a method for enhancing their status as a real-money online poker operator in preparation of one day servicing the entire nation. They'll never profit a dime from Nevada itself.
The Weekly Shuffle is our Sunday column with our observations and commentary on the poker world. Have an idea for an article? Leave a suggestion on the feedback page.
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